Investors might recall the old Wall Street Adage, “sell in May and go away,” which refers to an historical tendency for the stock market to stumble this time of year. However, investors seem to be pouring money back into stocks as well as commodities this month.

“There is one school of thought that we’ve gone too far…30 – 31 percent rally from the (stock market’s) bottom. It’s too much, too quick. The other school of thought is that there is so much money on the sidelines…they missed the move and won’t allow the market to pull back. They can’t stand it and have to jump in the water,” said Lind Plus Senior Market Strategist Jeff Friedman.

He said he expects the market to remain bullish heading into the Labor Day weekend. For the June S&P 500 futures, 897 is his “line in the sand,” and he recommends buying on dips unless the market moves below this level.

“In the end, I’m starting to believe that there is abundant liquidity and few outlets to invest.The result is stocks and corporate credit do well because there is nowhere else to go.The world is focused on transparency which is bullish for vanilla investments,” said MF Global Research Senior Equity Index Analyst Nick Kalivas, in his morning notes.

In addition, he said the CBOE Market Volatility Index (VIX) index, viewed as a measure of investor “fear” in the market looks likely to decline. The VIX has dropped below 30 for the first time in six months (before Lehman filed for brankruptcy).

“Profit growth is expected to improve, Fed policy is and will remain easy for some time, and credit spreads have room to narrow. From a political standpoint, goverment action has worked to stabilize earnings short-term. TARP and fiscal stimulus have worked to help the economy at the margin. Longer-term, government regulation and intrusion could lower the outlook for corporate profits and lift volatily. The trend in the VIX will change if profit expecatations change,” he said. “This will come from either negative corporate comments or more sluggish economic numbers.”

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